Sellers and buyers can cut out the financial institutions with a seller financing deal. It can be beneficial to both parties under the right circumstances. However, seller financing closing can be different.
If you want to know more about seller financing, you can click here for part one of this post. In part two, we will examine the documents and terms of seller financing deals.
Like any real estate deal, you must document various aspects of the sale. However, the types of documents might vary. You should have a purchase agreement regardless of the type of seller financing. A land contract deal will need a land contract. A lease purchase will also need a lease. You may also need a promissory note.
A real estate agent or title company can help with a seller-financing sale. They can ensure proper documentation. Documentation can go a long way toward protecting the rights of both parties.
Now that you know a little about the documents let’s look at the terms common to seller financing.
The loan amount is the total amount the seller is lending to the buyer. The parties should document this amount in the seller financing agreement.
A down payment is a good idea, even if it isn’t a conventional mortgage. The parties should record this amount in the seller financing agreement.
The parties also need to record the total purchase price of the property. In most cases, the purchase price will be the loan amount plus the down payment.
A seller financing deal should also include interest on the loan. In most cases, the rates are higher than those of conventional mortgages. The parties should negotiate the interest rate and document it in the agreement.
The term of the loan is another important issue. How many years will the buyer have to pay off the financing? The parties need to negotiate this issue and include it in the contract.
There should also be terms outlining the details of monthly payments. These terms should include the amount, the number of payments, and the due date. There may also be details about late payment penalties.
There can be many terms beyond those listed above. For example, there might be terms that require different types of insurance to protect the property. There can also be terms concerning taxes and balloon payments.
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